Thursday, January 08, 2009

The posts about my parents' estate planning has brought up a lot of interesting questions and comments about Medicare and Medicaid that deserve to be addressed separately... so here goes!

Many people have pointed out that there is often confusion between these two government plans: Medicare is a federal government health insurance program that covers all people over age 65. It covers hospitals and doctors, etc, when you're ill, but it doesn't cover nursing home care. The exception to this is when the patient is in a hospice program: if your doctor says you have less than 6 months to live and you're just getting palliative care for a terminal illness (as opposed to treatment aimed at curing that illness) then Medicare covers at least part of the cost of a nursing home.

Medicaid is a health program for people with low income and resources, of any age. But because of the increase in health care costs, many people turn to this program to help pay for nursing home care. In the case of many middle-class families like mine, any savings and assets can be wiped out very quickly by self-paying the $90,000 or so a year a nursing home can cost, so people who would never have been considered "low-income" can end up qualifying for Medicaid. Also, many families may wish to leave their assets to their children or charities, rather than using all of them to pay for the costs of a nursing home. Any estate planning lawyer will discuss what you can and can't do to keep assets within your family and still qualify for Medicaid.

This is where people start to talk about whether this is cheating. A commenter mentioned the phrase "tragedy of the commons," which is absolutely appropriate here. The term is often illustrated by an example from from centuries ago, when there were common lands on which anyone could let their animals graze. All the farmers knew the grass on the common land wasn't enough to feed everyone's sheep, but instead of each farmer thinking "ok, it will be better for all of us if I only let a few of my sheep graze on that land," they each said "I'd better send all my sheep over there and let them pig out before all the other farmers cheat me out of my share!" And of course the result is that the common land becomes barren and everyone shares the pain.

In our country today, it's much the same: everyone is looking out for themselves and trying to benefit as much as they can from public resources, which ends up depleting those public resources and increasing the tax revenue needed to pay for them. But no one wants to be the chump who volunteers to renounce those benefits. I don't like our health care system, but until it changes, I want my family to get the same benefits out of it that everyone else takes. I want them to use whatever legal strategies are available. I don't think there is any great moral high ground to be gained by not doing so.

The reality is that one way or another, my parents will have to spend a lot of their own cash on nursing home care-- they can't escape it, and they probably wouldn't want to even if they could. As another few commenters mentioned, not all nursing homes accept Medicaid, and those that do aren't necessarily very nice. As I understand it, some nursing homes only accept Medicaid patients. Some nursing homes don't accept Medicaid at all. Then there are some who may not initially accept a patient who can't self-pay, but would accept Medicaid later if that patient runs out of money. This is what seems to be the case with the nursing homes in my parents' home town. They are nice nursing homes-- I used to volunteer in one of them, and I remember it being a clean, comfortable, cheerful place where the residents seemed well cared-for. My parents would have to self-pay for at least a couple months to get in, but then they could apply for Medicaid once their funds start running low. In the next post, I'll bring this topic back to the details of our personal situation and lay out a possible scenario of what they'd be expected to pay before qualifying for Medicaid.

14 comments:

Actually, there is a Medicare benefit for nursing homes. Medicare will cover up to 90 days in a skilled nursing facility, aka nursing homes. After the 90 days, you have to pay with private funds or you spend down your assets until you qualify for Medicaid. The Medicare hospice benefit is separate from the nursing home benefit and that is 6 mos. Many nursing homes don’t offer hospice, so there is a distinction.

Also, depending on the state, childless adults (no matter how poor) are not eligible for Medicaid. Thus the uninsured homeless that you often see have absolutely no health care except for emergency room care. This is the case until they need nursing home care—all 50 states allow Medicaid to be used for nursing home care. As a result, you often see poor, elderly adults being held in nursing homes that accept Medicaid. I

The spend-down provision in Medicaid is very controversial, but there are few good options. Medicaid is meant for low-income people, period. In order to qualify, you have to spend your money down until you’re poor. From a consumer perspective, it would probably make more sense for Medicare to offer a decent nursing home benefit, but that would be easily tens of billions of dollars per year added to Medicare costs. I’m not sure if taxpayers are willing to spend that much more on Medicare, but it will be interesting to see what people demand in nursing home care once the baby boomers start needing them.

I can't believe how expensive nursing homes are, my family has been looking into them because my 92 year old grandmother is getting to the point that my aunt cannot care for her. She gave away most of her money several years ago, I thought it was silly at the time but now I see there may be some benefit from her being "poor". An aging populace is part of reality and we as a society need to figure out how to care for them and how to pay for that care. Thanks for bringing up this important subject. Many of us will be facing these issues with our own parents soon.

Thanks Julia, you are right about the 90-day skilled nursing facility benefit through Medicare, but there are really stringent guidelines-- you have to have come out of a hospital within the past month, and still be receiving treatment for the same problem you were hospitalized, etc.

Regarding nursing homes, there is long term care insurance that is readily available to many. While it may seem pricey, purchasing it while in your 50s or 60s may be affordable enough and prove to be a fiscally responsible choice.

Just another point of information re: Medicare. People under 65 can qualify for Medicare if they are disabled or have end-stage renal disease.

Another source of information to pay attention to regarding nursing homes is their ownership. The NY Times has done several pieces over the past year or so regarding private equity firms' acquisition of nursing home chains. Knowing who owns the nursing home, as well as who runs the place, is good information to have to help your decision making.

I'd like to repeat the suggestion from an earlier comment that people should consider long term care insurance. Americans may claim they can't afford the insurance but from your post it's clear that we can't afford to not protect ourselves. As a husband (with hopefully many years still ahead of me) I'd hate to fit the stereotype and get ill and or die before my spouse and end up burning through our nest egg in a few short months in a nursing home. That's why we'll be financially ready when that time comes, I want to do everything possible to not take money (by force) from someone else to pay for my nursing home care which is what medicaid does. Just some tho'ts from a libertarian.

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My name is Madame X, and I am a 40-something single woman living in Brooklyn, NY. I write about how much money I make, what I spend it on, how much I save, how I budget, my home-buying experiences, my financial goals and ambitions, my thoughts on class and what it means to be rich or poor, and anything else that relates to money. (More about me here, here, and here.)If you take any of my advice, do so at your own risk as I am not really qualified to give it. If you have advice to share, please do, and many thanks!Ad proceeds from this site are donated to worthy causes.